Someone posted this yesterday ... (spoiler alert, it isn't)
China is crashing as predicted
Global credit excess is worse than before the 2008 crash.
OK, we all think it is too. A couple of amusing facts might explain the divergence of this chart, but I'm no genius.
1. Assume the above US bank assets increased within sole jurisdiction of the USA with 330M people 2. China has 1,320M people, so 4x 2.1Trn = 8.4Trn might be reasonable (making a similar per capita increase) 3. China RMB trades at 6:1 US and GDP per capita as a measure of fx PPP is WAAYYY behind US 4. Chinese can survive on $100 per month, US can survive on $1000 per month. 5. "If" PPP of the RMB #fx rate goes to 3:1 (ever), then the banking assets are going to need to double in order to compete with the US. So ANOTHER 50% increase in bank assets might relate to fx PPP adjustments = $8.4 x2 = $16.8Trn 6. Ignoring the choking environment, if you have ever been to China, you understand why they make stuff we never could at prices we will never see again.
So while any collapse might be reasonable, the chart above ignores population and FX PPP factors.
US QE 1/2/3 were each worth about $800Bn making $2.4Trillion in round numbers. This has magically appeared as excess reserves. Now talking mouths of Euro are chanting for QE to avoid deflation.
Euro $60Bn is not exactly "a blitz", but it would set an important precedent. US FedRes has punched out $480Bn per year on average with a massive deficit - that's $48Bn per month in round numbers given the "taper" periods of 2 months to unwind some positions.
DAX intraday has a big gap above it here that would take 2 busloads of IMF wondermuppets to fill. Is the ECB going to QE?
From where we sit, upside would come from further monetary easing - it doesn't matter where the primary dealer network of banks secures zero risk free rate funds from.
2014 is full of good cheer - January we had "Abe sees World War One echoes in Japan-China tensions". In February we had Ukraine and Crimea. They are trying hard to knock this off it's axis.
I just came across an old Arab proverb (so the internet tells me) - "Sunshine all the time makes a desert" which proves a handy metaphor for a lot of things.
Confused? So are the best of them. The trend is your friend.
(20min delay)